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How to acquire revenue for a hotel

07 April 2022
There are only two ways to increase the total revenue for a hotel. First, acquire more customers. Then sell more to each customer. There are no other ways to secure the top line in any hotel business. This concept is straightforward and probably explains why hoteliers do not put much time into the revenue side of the P&L and instead focus on cutting costs.
Hotels, however, need a well-oiled commercial machinery to acquire enough guests and customers. Otherwise, the second part of the equation will become more complicated and not be enough for financial success. So let's start by sorting out the definitions.

The definition of guests and customers

Hotels tend to call everyone visiting the hotel and its facilities a guest. The guest in the hotel, spa, restaurant, bar, etc., is someone who consumes products and services. On the other hand, a customer is someone who pays for a product or a service. Most hotels have both consumers and businesses that pay for products and services. In other industries, this is called a B2B relationship. There are two types of customers in hotels. One is the consumer that pays for everything with their own money, popularly called B2C. The other type of customer is a business entity, popularly called B2B. A hotel needs to attract B2B business, such as corporate, travel agents, tour operators, government, etc., to increase the number of guests. At the same time, hotels need to attract consumers to fill up the rooms when the demand for B2B business is low.

Attract guests and customers

There are a few concepts or rules of thumb to attract guests. The most common is "Build the hotel, and they will come." Another one is to join one of the mega-chains, and they will send guests to the hotel. A third would be to add the hotel to the distribution channels, such as OTAs, so that people will find the hotel and book. Those concepts work well when the demand is strong all year round in a market where supply is scarce. But unfortunately, there are not many of those market conditions any longer. As a result, most hotels need a better strategy to attract guests. Here are some of the tricks.

Select a few particular target groups

First, research to understand the reasons for travel to the destination. Next, select the target groups or segments of all the travelers to the destination you would like to attract to your hotel. When you understand why your specific audience needs overnight accommodation, it is much easier to create the offerings that would attract them to your hotel.

Rate premium

If your hotel could provide a remarkable experience that has a perfect fit for the guests' needs, they would prefer to stay in your hotel over any other hotel. Therefore, you will be able to receive a rate premium over your competition. If your offering is the same as all other hotels' offerings, it will only be about price. Why pay more for the same thing. Airlines have successfully offered the same product and service, driving fares to a rock-bottom low. Airlines should no longer be the role model in pricing for hotels.

Focus on shoulder seasons

Focus on the few well-defined target groups that travel to the destination during shoulder seasons. These periods or dates are when the competition is the hardest. There are more rooms than guests. The hotel with the best offering for the target group will win the business. All hotels will run at 100 % occupancy during the high season, so you only need to raise the rates, and you are in the game. During low season every hotel will struggle, but if you have built a strong reputation within a specific segment, you stand a better chance of getting more than your fair share even in low season.

Buy a ticket to the game

Another good practice to attract guests is to sign agreements with corporate customers, travel agents, and other travel trade partners to commit to buying room nights in the future. These agreements are a necessity to be in the game. Without an agreement, the business will go to the competition.

Sell more to guests and customers

The second part of the equation maximizes the order value or spending per guest. It is almost always possible to sell more to each guest. Every person needs to eat and drink, so F&B is a given part of the guest spending. The average guest spend depends on the target group. A backpacker probably spends less than a wealthy couple staying in a five-star hotel. Again, revisit the target groups and find out how you can get a larger share of their wallet.